Norske Skog launches exchange offer to all holders of 2016 and 2017 notes

Norske Skog is launching an offer (i) to holders of the senior notes due in 2016 for new unsecured notes due in June 2019 and (ii) to holders of the senior notes due in 2017 into a mix of new unsecured notes due in June 2026 and perpetual notes. Concurrently, Norske Skog is soliciting consents of holders of the 2016, 2017, 2021 and 2023 notes to amend the terms and conditions of their existing notes. The purpose is to achieve a maturity extension, debt reduction and one common governing law of the group's international bond loans.   

- A successful completion of the transactions would materially strengthen our medium-term capital structure by realizing immediate de-leveraging, substantially improve our equity position, reduce the cash interest level and extend material debt maturities. The sharp weakening of the Norwegian krone has increased the net interest bearing debt and squeezed our book equity to an unacceptable level. If the transaction is successfully completed, we can avoid a comprehensive balance sheet restructuring in the foreseeable future, said Mr. Sven Ombudstvedt, President and CEO of Norske Skog.

The new unsecured notes, due 2019 and 2026, offered as exchange consideration will be as on materially the same terms as those applying to the existing 2017 notes. The perpetual notes will receive a cash interest of 2%, which can be deferred in whole or in part, with maturity in December 2114.

The new unsecured notes due in June 2019 and June 2026  will, as with the existing 2016 and 2017 notes rank junior to the EUR 290 million senior secured notes (SSN) due in December 2019, and the EUR 159 million 2021 and the USD 61 million 2023 senior guaranteed unsecured notes. There is no pre-arranged liquidity facility available to fund any repayment of 2016 or 2017 notes held by investors who choose not to participate in the transaction. The transaction has not been pre-marketed. The exchange offer and consent solicitation is open for 20 business days and will expire on Wednesday 16 December.  

Norske Skog has encountered an exceedingly more challenging operating environment in 2015 than envisaged at the beginning of the year. European newsprint prices declined by close to 15% during the second quarter following a fight for market share. In Asia, newsprint prices are historically low, creating a significant challenge for the Australasian business, as lower domestic demand cannot be exported at meaningful margins. The outlook for 2016 is for an improved pricing environment; however, the lost contribution in 2015 is unlikely to be compensated in the first half of 2016.

A successful exchange will protect the value for all stakeholders by creating an opportunity for the group to benefit from an expected cyclical uptick and enable further work to restructure and consolidate the European publication paper industry. An unsuccessful exchange would raise the prospect for implementation of a contingency plan with SSN and exchange bondholders. Such an outcome would likely result in a comprehensive balance sheet restructuring and a significant or total loss in value for 2016 and 2017 notes.

- We believe that the successful completion of the transaction will protect value for all our stakeholders. We believe to be in a better cost position than before, due to continued cost reduction programmes, lower oil and energy prices and better economies of scale at our remaining mills. We further continuously adapt our production portfolio to market needs. The growth investments beyond paper are on track and will contribute to gross operating earnings already from 2016, explained Mr. Ombudstvedt.

In relation to the exchange offer, Norske Skog's management will be available for one-to- one meetings towards the end of next week in London with holders of the 2016 and 2017 notes and host meetings in New York in week 50. There will also be arranged group lunch meetings open for all investors. If you are a holder of 2016 or 2017 notes requesting a one-to-one meeting, or if you would like to attend an investor lunch, please register via e-mail to: exchangeoffer@norskeskog.com.  

For further information on the details of the exchange and consent solicitation offer, please see the attached offer release announcement. Copies of the Exchange Offer and Consent Solicitation Memorandum are available for eligible holders of 2016 and 2017 notes from the Exchange and Tabulation Agent, Lucid Issuer Service (for information by telephone: +44 20 7704 0880; Attention: Thomas Choquet/Yves Theis; Email: norskeskog@lucid-is.com). A separate stock exchange release will be available on www.newsweb.no under the Norske Skogindustrier ASA ticker "NSG" (IssuerID).

This information is not for distribution in the United States and is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.

Norske Skog
Communications and Public Affairs

This press release may include projections and other "forward-looking" statements within the meaning of applicable securities laws. Any such projections or statements reflect the current views of Norske Skogindustrier ASA or its subsidiaries ("Norske Skog") about further events and financial performance. Although Norske Skog believes that these views and assumptions are reasonable, the statements are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected. No assurances can be given that such events or performance will occur as projected and actual results may differ materially from these projections.

This press release shall not constitute an offer to sell or a solicitation of an offer to purchase any securities in the Unites States, and shall not constitute an offer, solicitation or sale in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful. The securities have not been and will not be registered under the Securities Act of 1933 (the "Securities Act").  The securities may not be offered or sold in the United States absent registration under the Securities Act or an applicable exemption from registration requirements. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from the issuer and that will contain detailed information about the company and management, as well as financial statements. This press release is being issued pursuant to and in accordance with Rule 135e under the Securities Act.

In member states of the European Economic Area, this press release (and any offer of the securities referred to herein if made subsequently) is only addressed to and directed at persons who are "qualified investors" within the meaning of Article 2(1)(e) of the Prospectus Directive.

This press release is directed only at (i) persons who are outside the United Kingdom or (ii) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2) of the Order or (iv) persons to whom an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the "FSMA")) in connection with the issue or sale of any notes may otherwise be lawfully communicated or caused to be communicated (all such persons together being referred to as "relevant persons"). Any investment activity to which this communication relates will only be available to and will only be engaged with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.

This press release does not constitute an offer to sell or buy or the solicitation of an offer to sell or buy the existing bonds  and/or the new unsecured notes, as applicable (and offers of existing bonds for exchange pursuant to the offers will not be accepted from holders), in any circumstances in which such offer or solicitation is unlawful.